Latest Developments, October 19

In the latest news and analysis…

The truth about tax agreements
The Tax Justice Network writes that the Cayman News Service “has blown the lid on one of the biggest lies of recent years about tax havens/secrecy jurisdiction” that tax information exchange agreements (TIEAs) bring transparency to tax havens.
“On the face of them TIEAs appeared “fearsome” with one tax authority forcing another to disclose information on foreign nationals, [Mourant Ozannes’s Robert] Shepherd noted, but actually there was a good deal that trust professionals could do to protect beneficiaries and honour obligations of confidentiality, citing a number of hoops that tax authorities needed to go through to extract information. For example, the onshore authority must initially identify the tax payer in question about whom they require the information and equally they must have exhausted all local powers to gain information first.

Ziva Robertson from Withers said that there was a big difference between the political will to be seen to be creating TIEAs and the actual economic effect of their implementation.”

Inclusive growth and inequality
The International Monetary Fund’s new economic outlook for Sub-Saharan Africa predicts continued high growth for the region and disputes the apparent disconnect between growth and poverty reduction, while conceding that inequality is rising.
“First, for the region as a whole, the link between poverty and growth is generally weak. But this relationship is considerably stronger for the region’s high-growth countries.
Second, there is evidence of growth having been fairly inclusive in the region’s high-growth countries. We find, for example, that the lowest quartile in three out of the four case studies (Ghana, Tanzania, Uganda) has enjoyed fairly high increases in consumption. But there are signs that in many of these countries higher-income households have enjoyed still higher growth in consumption. This implies some increase in inequality, broadly in line with patterns observed in a number of high-growth Asian countries.”

Malaria vaccine agnosticism
New York University’s Karen Grépin urges caution over the news of a possible malaria vaccine that set off so much excitement earlier this week.
“But as a public health professional, I just don’t think that enough new evidence has been presented for us to think that we found a “game changer” when it comes to malaria prevention and control. The real question, at least in my mind, that is relevant in this discussion is: does this vaccine provide any real lasting immunological protection in the target populations? The interim study was not set up to address this question. The actual full study was but, and I am not entirely sure why, the interim results were published anyway years before the real results of this study are going to be known. I am not the only one who questions the merits of this approach, in the accompanying editorial in the [New England Journal of Medicine] by Nicolas Witte, a true expert in this area, said “there does not seem to be a clear scientific reason why this trial has been reported with less than half the efficacy results available”. But of course we all know it is not always just science that drives most scientific discussions.”

GM food politics
IRIN reports on the ongoing debate over genetically modified food in Africa which finds itself in the middle of an ideological and commercial rivalry between the US and EU.
“A deep mistrust also prevails in Africa, given the fact that two power blocs – the EU and the USA remain divided over GM.
Only one strain of GM maize, Monsanto 810, and one modified potato, have been approved in the EU, and most countries grow neither commercially. Spain accounts for about 80 percent of GMO grown in the EU in terms of land under cultivation, but Austria, France, Greece, Hungary, Germany and Luxembourg have banned all GMO cultivation.
On the other hand, in the USA, where 70 percent of maize is GM, GM food need not be labelled. Some food experts say both the EU and the USA have vested interests in promoting their respective views in Africa, which is seen as a potential market and supplier of either GM or non-GM products.”

The Overseas Development Institute’s Jonathan Glennie questions the common claim that poor countries will suffer too unless Europe recovers quickly from its current economic crisis.
“But growth in some parts of the world and not others is just as plausible as growth all over the place. Plenty of economists view the rapid growth of Europe and the US in the past two centuries as a cause of impoverishment in other countries, rather than an unrelated consequence of sound economic management and hard work.
While income per capita has grown rapidly in the rich world for the past three decades, from about $14,000 (constant 2000) to about $26,000, it declined in sub-Saharan Africa (from $571 to $507) and stagnated in all low-income countries (at around $240) until things started to get marginally better in the first decade of this century. It is simply not the case that western prosperity is necessarily associated with prosperity elsewhere.”

Commodity bonds
Harvard University’s Jeffrey Frankel argues poor countries that depend heavily on resource exports are vulnerable to market volatility and could benefit from issuing commodity bonds rather than borrowing in dollars.
“The advantage of such bonds is that in the event of a decline in the world price of the underlying commodity, the debt-to-export ratio need not rise. The cost of debt service adjusts automatically, without the severe disruption that results from loss of confidence, crisis, debt restructuring, and so forth.”

Millennium Villages Project transparency
The Center for Global Development’s Michael Clemens and the World Bank’s Gabriel Demombynes argue that the Millennium Villages Project uses evaluation methods that make it impossible to judge whether or not it is having the desired (and claimed) results.
“A critical element of persuasive impact evaluation is that it is independent and transparent. An independent and transparent analysis of its data could make the MVP evaluation more persuasive. The MVP has told us, however, that it will only consider making data available to outside researchers after it has completed publishing all of its work on data collected through 2016. This suggests the MVP will not share any of the data it has collected until roughly 2020, 15 years after the project began.”

Apples to apples
Oxfam’s Duncan Green has posted a World Bank list of the world’s 100 largest economies, which includes countries, companies and cities, thereby prompting a number of apples-to-oranges comments and a subsequent update to the original post.
“Fascinating comment from [the Bretton Woods Project’s] Peter Chowla, pointing out that a better comparison is between government tax revenue and corporate revenue, and when he crunched the numbers (he didn’t include cities), he got only 29 countries in the top 100 – the rest were corporates.”